Jump to content
DOSBODS
  • Welcome to DOSBODS

     

    DOSBODS is free of any advertising.

    Ads are annoying, and - increasingly - advertising companies limit free speech online. DOSBODS Forums are completely free to use. Please create a free account to be able to access all the features of the DOSBODS community. It only takes 20 seconds!

     

IGNORED

Credit deflation and the reflation cycle to come (part 3)


spunko

Recommended Posts

  • Replies 30.1k
  • Created
  • Last Reply
ThoughtCriminal
35 minutes ago, Chewing Grass said:

Farming must be a shit business in Sweden if that is all they sell for, Sweden isn't generally cheap for anything.

Its just a northern Sweden thing: Norrland has 10% of the population but 66% of the land. Its 10% bigger than Britain but with a million people instead of 65 million.

 

Even the south isnt expensive outside of Stockholm, Malmö Gothenburg etc.

 

Same applies to most of Europe though. Look at Normandy, same properties for similar price.

 

Not news to anyone on here but this country is uniquely fucking nuts when it comes to land prices.

 

My ex council house in teesside just sold for 85k, on an estate that was once nice and is now a shit hole.

 

I rest my case.

Link to comment
Share on other sites

Democorruptcy
9 minutes ago, ThoughtCriminal said:

Its just a northern Sweden thing: Norrland has 10% of the population but 66% of the land. Its 10% bigger than Britain but with a million people instead of 65 million.

 

Even the south isnt expensive outside of Stockholm, Malmö Gothenburg etc.

 

Same applies to most of Europe though. Look at Normandy, same properties for similar price.

 

Not news to anyone on here but this country is uniquely fucking nuts when it comes to land prices.

 

My ex council house in teesside just sold for 85k, on an estate that was once nice and is now a shit hole.

 

I rest my case.

If you fancy the Swedish countryside @sextonmight be able to offer advice.

Link to comment
Share on other sites

DurhamBorn
7 hours ago, WICAO said:

Running a backtest of historic sequence of returns (using US data which has been one of the best performing markets historically so biases elsewhere will likely be worse) always reveals some interesting things including playing your story out.

To make the maths round/easy let's assume £1M pot, 60% equities : 35% bonds : 5% cash (so a crude 60:40 portfolio), 5% drawdown, 0.25% fees on equities/bonds (so not with a typical IFA which will make it all worse as you highlight), 30 year retirement and rebalanced annually.

It shows a 5% drawdown has sequence of return failures in a third of all sequences.  5% is just too high a drawdown.  Do you know of any IFA's actually getting the punters to do this?

In FIRE land the '4% Rule' is talked about often so let's change the drawdown to 3.75% which would be circa 4% with fees.  Now our failures are down to 'just 4%' but what's interesting are the start years - 1965, 1966, 1967, 1968 and 1969.  Weren't they start years where periods of high inflation occurred early in the sequence?  Wasn't the Great Inflation considered to have started in 1965...  The great depression was bad but the inflation years were worse from a sequence of returns perspective.

As you highlight inflation is a real risk for sequence of returns.

Now any prudent (IMHO) FIRE'ee is not even at these levels and/or has some sort of back up plans.  Personally, I've gone with a max 2.5% drawdown (and I'm now not even at that, if I was drawing down it would now be 1.8%).  Drawdown at 2.5% + those 0.25% fees and all of a sudden historic success is 100% and with the worst case sequence that £1M is now £620k inflation adjusted after 30 years.

30 years of retirement and worst case still 62% of my wealth inflation adjusted remaining.  I'd take that.

Given I intend to live for a while longer let's change that 30 years to 40 years.  This helps the story and now I have worst case 84% remaining.

This is why I worked a bit longer and have learnt to live very well on little.  Reduce drawdown % including fees and taxes and all of a sudden you don't have to be an investing genius.  The market will do.

For anyone interested in more here's a simple tool https://ficalc.app/

Of course lots of DYOR in there and what would I know...  After all I'm not an IFA...

Crucial worry now is inflation,and that inflation starting at the top of a bond bubble and stock bubble (in tech/growth).It also matters when someone goes into retirement.Drawing down from last year inflation adjusted means 17% spending power down after one year.Remember as well 99% of these people arent investors like us,they are people who have £250k pensions,go at 60 and rely on the 4%/5% and state pension.

You have tiny risk of running out, big salary,big savings and still working.The risks are the millions of ordinary workers earning in the £30 to £35k area whos lifetimes savings in their pension could go within 8 to 15 years in drawdown.When i did a final salary transfer i had to act dumb and that the IFA would be managing it so they would do the transfer,i then moved it to my SIPP the day it arrived to their horror.The mix he came up with was very very decent and wasnt far off a 60/40 type,including some of Vanguards as well.I could see though of course it had no chance of doing its job in an inflation cycle.Iv still got the portfolio model.The IFA was 32.Clear she had zero understanding of inflation cycles.1.4% fees on top of fund fees as well.They have thousands of clients, Joslin Rhodes in Stockton.

This cycle will and is moving wealth from ABC to XYZ

In most periods a 60/40 is a good place for most people with an income portfolio of direct holdings as well.However during an inflation it isnt.Not a disaster like some areas,but for those in drawdown i fear they are in for a huge shock.I think it will mean more BTL sales and more Equity Release.

Link to comment
Share on other sites

sleepwello'nights
22 hours ago, Chewing Grass said:

Actually they can as it is written into standard mortgage agreements that they can reclaim the debt at any time for any reason.

Not quite. That clause is in their standard terms. The standard terms are subordinate to later terms that are stated when the mortgage is agreed. 

If the terms you accept are for a term of 25 years, for example, then they cannot fall back on their standard terms just because they want to.

Link to comment
Share on other sites

DurhamBorn
2 hours ago, Jesus Wept said:


AT&T unloaded its streaming business at the perfect time (WB discovery) and is up about 10% since then. However, despite encouraging signs emerging from AT&T’s turnaround, the telecom operator remains one of the most indebted entities in the US, with $169 billion in net debt by the end of the first quarter.

That heavy debt load will limit the company’s ability to grow its payouts, lowering its investment appeal”. 
 

@DurhamBorn How does their debt burden ($169bn)sit with you? Is it fixed rate debt that will be eroded away with inflation? Is that debt falling? On an average year they make about $20bn profit. 

Pay about 5.5% yield a year. 

Historical share price:


9C378E84-3558-4C0B-89CF-417A9AB9DEC2.thumb.jpeg.0cf2687ebf15fc3571a55a6675194185.jpeg

 

 

The debt loads are why profits will go up as long as they increase prices,even half 3/4s the inflation rate because those increases are higher than the coupons on debt.ROCE increasing is the key to telcos going forward.Of course during the cycle they will need to pay down a lot of debt as it comes due rather than roll it all over and for that reason divid wont fly,but remember,to beat this cycles inflation,if T doesnt cut its divi again 2%pa increases are all thats needed.Telcos arent about making big capital gains,they are about keeping ahead of this inflation.

Link to comment
Share on other sites

52 minutes ago, ThoughtCriminal said:

I often get the crazy idea of buying farmland in North Yorkshire too.

 

When I find myself on Rightmove laughing hysterically at the prices, I find that the remedy is to look at the price of land on the continent. I soon realise I'm being a fucking idiot and punch myself in the face.

 

Here's a 27 acre farm, with 5 bed farmhouse, multiple outbuildings, 6 acres of forest, private lake in Skelleftea Sweden. Price? 78k of your English pounds.

https://www.4321property.com/sweden/ad921243/?Rental=Buy-Sell&Country=sweden&type=houses&beds=5&maxprice=200000&minprice=0&a1=Vaesterbotten&a2=Skelleftea Kommun&a3=&a4=&cn=Skelleftea&s8=

That'll get me around 3-4 acres in North Yorkshire. Complete with 50% clawback clause if planning achieved in next 50 years.

 

Each to their own, but I know which makes more sense.

I agree. Anything with a farm on it in North Yorkshire is balmy.

This was what I found to show ‘slightly better’ value. Please note though…I do agree and there were many more examples showing massive prices particularly on smaller farms….but also on big farmland plots too.
 

Derelict barn, 54 acres dodgy land £190k

https://www.rightmove.co.uk/properties/86282042#/?channel=COM_BUY


100 acres £435k (split into lots and I assume the crapper land is cheapest) 

https://www.rightmove.co.uk/properties/78578382#/?channel=COM_BUY


I will hide in a field and wait for a farmer to sell cheap….I might be a while😂

In the meantime (back in the real world) I am watching this volatile day to buy a couple of ladders on shares. 👍

Link to comment
Share on other sites

OK, maybe a bit of licence (I don't know or need to care) but this helped open up my Overton window to the wider possibilities....

Screenshot_20220519-093946-517.thumb.png.c6accd8c7199809a6694e496599ce335.png

Doesn't change what I do, just makes me try to do it better! 

Link to comment
Share on other sites

17 hours ago, snaga said:

Sunak warns of a tough few months .... so what's going to happen in a few months? a very tough few more months? then a few years? The tough times are here until wages catch up, which may be never. I really think we're being led by people that don't understand inflation. For years they misrepresented falling inflation as falling prices, rather than a reduction in rate of increase. Now they are doing the reverse?

Rishi Sunak warns of tough few months as inflation soars - BBC News

In fairness to Rishi, nowhere in that statement does he say that the months will be consecutive.

They could be:-

May 2022

January 2023

November 2023

Ad infinitum

 

Link to comment
Share on other sites

ThoughtCriminal
5 minutes ago, Pip321 said:

I agree. Anything with a farm on it in North Yorkshire is balmy.

This was what I found to show ‘slightly better’ value. Please note though…I do agree and there were many more examples showing massive prices particularly on smaller farms….but also on big farmland plots too.
 

Derelict barn, 54 acres dodgy land £190k

https://www.rightmove.co.uk/properties/86282042#/?channel=COM_BUY


100 acres £435k (split into lots and I assume the crapper land is cheapest) 

https://www.rightmove.co.uk/properties/78578382#/?channel=COM_BUY


I will hide in a field and wait for a farmer to sell cheap….I might be a while😂

In the meantime (back in the real world) I am watching this volatile day to buy a couple of ladders on shares. 👍

Yeah, that one in arkengarthdale has been up for well over a year. Shit access, hilly and needs a bloody fortune spending on it.

 

Not knocking you as I sometimes think it myself, but the idea that that's a more reasonable price just shows you how nuts things are.

Link to comment
Share on other sites

DurhamBorn
47 minutes ago, geordie_lurch said:

Don't think anyone has mentioned this yet... that is $1.9 trillion and a $140 billion jump in one day - yesterday :ph34r:

It's hard to get a handle on how big a trillion actually is but as someone else on Twitter helpfully explained: if each second counts as one:

  • One million is 11 days
  • One billion is 31 years
  • One trillion is 31 thousand years

:o

This is the key focus of the Fed,getting that out into the economy,if they fail they will go back to monetizing government debt instead.

Link to comment
Share on other sites

2 hours ago, Cattle Prod said:

Interesting, thank you. What time period does that back test cover/how far back does it go?

1871

Link to comment
Share on other sites

geordie_lurch
31 minutes ago, DurhamBorn said:

This is the key focus of the Fed,getting that out into the economy,if they fail they will go back to monetizing government debt instead.

Yes and all I remember about Repo rates was that there was some sort of crisis in September 2019 and then Covid appeared a few months later :ph34r:The following is from May 2021 just 12 months ago but yesterday the figure is nearly double at nearly  $2 Trillion O.o

EDIT An explanation of the Repo market (and Reverse Repo) with some details on the September 2019 Repo crisis here: https://www.thelondonfinancial.com/markets/reverse-repo-and-the-collateral-crisis to help those who are easily confused like myself :Beer:

REPO

"Since around September, 2019, the US Federal Reserve has been heavily and directly involved in the repo market – for the first time to this extent since the financial crisis. This was due to a severe ‘cash crunch’ at the time that caused repo rates to soar upwards of 10% (i.e. banks would not part with cash for lower than this rate). The Fed intervened with a view to reduce friction in markets, not unlike oiling a machine, before exiting out again through the first half of 2020. Of course, we all know now what was to come during this period. The shock to the economy caused by Covid-19 forced the Fed’s hand and meant there was no way they could withdraw from the repo market without causing markets to grind to a halt. What started as a $50-60 billion operation in 2019 was ramped up dramatically with the announcement of a 3-month injection of $500 billion in March 2020. The following day, the Fed reinforced their position and announced they would inject a further $1 trillion over 3-month and 1-month operations, stating they would be prepared to offer up to $1 trillion per week going forward."

Reverse Repo

"At this point it is important to note that the Fed also offers what is known as a ‘reverse repo’ via their Reverse Repo (RRP) facility. This uses the same mechanism as a repo, but rather than the Fed buying Treasury securities (T-bills), they instead exchange those same securities and receive cash on their balance sheet – purchasing them back the next day. The key difference between the two types of operations are that, while repo operations add liquidity to the financial system by providing institutions with cash, reverse repo operations instead remove liquidity from the system. According to the Fed’s own rules on repo market operations, “overnight operations cannot go over $500 billion in lending”. However, as mentioned at the start of the article, this figure has almost doubled with the recent surge in overnight reverse repo operations. So what has caused this increase and what are the potential ramifications?"

Link to comment
Share on other sites

BadAlchemy
2 minutes ago, DurhamBorn said:

This is the key focus of the Fed,getting that out into the economy,if they fail they will go back to monetizing government debt instead.

DB, if the RRP figure is going up does that mean commercial banks are still not yet lending it out into the economy, or could they be doing that but the RRP figure is going up anyway because it is being replenished by Fed doing further TOMO / Temp open market operations (!?)

Link to comment
Share on other sites

Maybe IBTL and TLT are bouncing around because of this....

Screenshot_20220519-102255-053.thumb.png.a306cde4bce8a743c07e0420a6735795.png

Despite the words, we live in an evolving looking glass world so it could go either way.

PS:  It's not "attempting" a breakout.  It has.  Now we need to see if it retraces and bounces off prior resistance to confirm.

Link to comment
Share on other sites

belfastchild
9 hours ago, JMD said:

 Does anyone on the thread know about these batteries (they differ from an EV battery), the commods they require, and the likely manufacturers that will build them? If the entire EU population is mandated to use this tech it would be great to know more about it/how to invest in it.

Be careful of your definition of battery, what they actually mean are ESS energy storage systems, one part of which are 'batteries' as we know them.
My house battery is based on pylontech batteries which are rack mounted capable. They are already used in the manner you described (co-located with local transformer to smooth out supplies).

These batteries are different chemistry to the EV ones as they are designed for longevity and really one cycle per day rather than output and ability to fast charge (why I think anyone buying an EV and expecting it to be half decent after about 8 years is mad - but I digress).

What is interesting is the development of other ESS systems. Ive signed an NDA on one but roughly its a really old technology being adapted for this type of thing, it might not work but if it does it will be something that will be easily serviceable by a local tradesman.
Other things are/were being trialled and I sort of did one of them myself. I went to a series of talks on this and one of them was just using compressed air. Lossy as hell but got round the problem of overloading the local network and then delivering a IIRC 30% of the days output at evening peak (all thats really required). The problem with any of that is heat and noise as losses so other groups were looking at ways of capturing and using the heat. Of course then you have the problem of noise close to where you need the heat, but it shows lots of places are looking at it.
The great thing about that one is most people have some version of the tech in their house/car and it can be made locally out of cheap(well previously cheap) or recycled materials, with some welding and electrical knowledge.
I now charge my two garage compressors up on sunny days if I see a change in the weather and so Im not now limited to working in the garage when its too hot, yes there is some loss and leakage but its more about time shifting the energy.
People tend to narrow in on the lossy nature of all these, admitted old techs (steam engines were talked about as well) but when you have renewables you will have massive amounts of excess energy at times if you plan to cover the lull periods, so right now the infrastructure needs built and then concentrate on the losses.

Could easily see local pumped storage with tanks, large compressed air tanks, back to electric milkfloats locally (use larger diesel vehicles to deliver to local storage places kept cool with the losses etc).

Link to comment
Share on other sites

1 hour ago, BadAlchemy said:

Small (5 acre) land ownership worked great for us for years... until suddenly it didn't! Beware an asset turning into a massive fucking liability, overnight.

What's the story there ? :ph34r:

Link to comment
Share on other sites

belfastchild
15 hours ago, Cosmic said:

Can't you just, you know, turn them off? Or just stop feeding if the voltage increases past X.

Thats the way it works but some devices are more sensitive to overvoltage than the DNO. Couple of burglar alarms went off, RCD tripped and microwave a couple of doors up packed in.

Link to comment
Share on other sites

Transistor Man
10 hours ago, JMD said:

Yes, I think Rick Rule (pretty certain it was him) said recently to invest in copper, plus the local-grid-battery (I don't know their technical name) manufacturers and the commods to make these type of batteries. He was dismissive of EV batteries because electric cars won't sell in huge numbers, but unfortunately didn't elaborate much on the local grid batteries. The problem you cite is apparently solved by using such a type of shared local battery system.                                                                                                                                                  Does anyone on the thread know about these batteries (they differ from an EV battery), the commods they require, and the likely manufacturers that will build them? If the entire EU population is mandated to use this tech it would be great to know more about it/how to invest in it.

There has to be an opportunity for flywheel energy storage here.

With the rotating inertia, they could be increase grid stability as well. 

I'm surprised it isn't getting anywhere.

Link to comment
Share on other sites

DurhamBorn
40 minutes ago, BadAlchemy said:

DB, if the RRP figure is going up does that mean commercial banks are still not yet lending it out into the economy, or could they be doing that but the RRP figure is going up anyway because it is being replenished by Fed doing further TOMO / Temp open market operations (!?)

Could be or the other as you say,il look at the numbers later today to try to see.Its the Feds key focus i think to ensure enough is there to lend to fund onshoring.

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Recently Browsing   0 members

    • No registered users viewing this page.

×
×
  • Create New...